FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department announced Friday publication of the final regulation governing the electronic funds transfer (EFT) of Federal government payments to recipients.

The final rule emphasizes recipient choice and the importance of ensuring that recipients are not disadvantaged or forced into making a choice that is not right for their circumstances. More than 200 comment letters submitted to Treasury by individuals and organizations were considered in determining the final rule. The payments covered by the rule include Social Security, Veterans benefits, Railroad Retirement benefits, Federal salaries and retirement benefits and vendor payments.

Treasury's Financial Management Service (FMS) reported significant increases in the number of people signing up to receive their payments electronically. In August 1998, 70 percent of benefit recipients received payments electronically, up from 50 percent two years ago. The Social Security Administration and the Department of Veterans Affairs each posted higher EFT growth rates than initially expected bringing EFT participation totals to 73 and 71 percent respectively.

"The final rule protects the recipient's right to choose while encouraging the safety and convenience that EFT provides," Treasury Under Secretary John D. Hawke, Jr. said.

The final rule, implementing provisions in the Debt Collection Act of 1996 requiring Federal payment to be made electronically beginning Jan. 2, 1999, details the conditions under which recipients can continue to receive paper checks if electronic deposit causes them a hardship. The rule also paves the way for the establishment of low cost accounts for recipients without existing savings and checking accounts that will enable recipients to receive payments by direct deposit.

The rule finalizes the waivers announced by the Treasury in June 1998. The final rule states that any individual is eligible for a hardship waiver if receiving direct deposit will cost him or her more than receiving a check. In addition, the rule provides for waivers covering physical or mental disability and geographic and language barriers. These waivers are self certifying, which means that payment recipients make their own decisions as to whether or not to sign up for direct deposit; if they choose not to sign up for direct deposit, they will continue to receive a paper check.

Treasury will continue to work with other Federal agencies to ensure the recipients are notified of their choices under this regulation and can choose whatever payment option is best for their particular circumstance. The Treasury Department emphasizes that no payment will be withheld of delayed for any reason related to the implementation of EFT.

Direct deposit of payments through EFT has become increasingly popular because it is safer, more secure, and for most recipients, more convenient than paper checks. The EFT initiative will continue to significantly improve the way Americans receive their government payments. Additionally, EFT will enable the government to achieve significant cost savings and therefore save money for all taxpayers. Electronic Transfer Accounts

The final rule provides that individuals receiving certain types of Federal payments will be eligible to open an electronic transfer account (ETA). The final rule makes the ETA -- a basic account offered at reasonable cost and with consumer protections -- available to all recipients.

Any Federally-insured financial institution will have the option to offer this account, subject to requirements to be set forth in a published notice next month. The Department of Treasury expects to publish a notice in the Federal Register outlining proposed specific characteristics of the ETA for comment. The public will have 30 days from the publication date of the ETA notice to provide comments to Treasury.

Although the final rule does not regulate non-ETA accounts opened voluntarily by recipients, Treasury continues to be concerned about arrangements giving recipients access to their EFT deposits through uninsured third-party providers. Treasury encourages Federally-insured depository institutions that have entered into, or have announced plans to enter into, arrangements with non-depository providers of payment services, such as check cashers and money transmitters, to disclose information about fees and costs imposed by all parties to the arrangement, as well as the legal relationship involved and whether the funds are protected by Federal deposit insurance.

Treasury will monitor these arrangements and may consider separate rule making in the future if warranted. Any such proposed action would be published for public comment.